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Federal Register
/Vol. 67, No. 151/Tuesday, August 6, 2002/Proposed Rules
significantly affected by the subjectmatter of the negotiated rulemaking andannounced that we expected thatrepresentatives of each of thoseconstituencies would likely be selectedas members of one, or both, committees.This Notice of Proposed Rulemaking(NPRM) is the result of the deliberationsof Committee I.The members of Committee I were:
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Corye Barbour and Ellynne Bannon(alternate), representing students,including the United States StudentAssociation and the State PIRGs (PublicInterest Research Groups) HigherEducation Project;
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Deanne Loonin and Amy Marshall(alternate), representing legal assistanceorganizations that represent students;including the National Consumer LawCenter and Community Legal Services;
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Irv Bodofsky and Virginia Foster(alternate), representing financial aidadministrators at institutions of highereducation; including the NationalAssociation of Student Financial AidAdministrators;
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Alisa Abadinsky and Laurie Quarles(alternate), representing businessofficers and bursars at institutions of higher education, and institutionalservicers; including the Coalition of Higher Education AssistanceOrganizations and the NationalAssociation of College and UniversityBusiness Officers;
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Reginald T. Cureton and William
‘‘
Buddy
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Blakey (alternate),representing institutions of highereducation eligible to receive assistancefrom programs authorized under TitlesIII and V of the HEA; including theUnited Negro College Fund and theNational Association for EqualOpportunity in Higher Education;
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George Chin and Patricia Smith(alternate), representing four-year publicinstitutions of higher education;including the American Association of State Colleges and Universities;
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William Schilling and Maureen R.Budetti (alternate), representing private,non profit institutions of highereducations; including the NationalAssociation of Independent Collegesand Universities and the Association of American Jesuit Colleges andUniversities;
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Ray Testa and Nancy Broff (alternate), representing for-profitpostsecondary institutions; includingthe American Association of Cosmetology Schools and the CareerCollege Association;
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Scott Miller and Elise Nowikowski(alternate), representing guarantyagencies and guaranty agency servicers;including the National Council of Higher Education Loan Programs, theStudent Loan Servicing Alliance, theGuaranty Agency CEO Caucus, theNational Association of Student LoanAdministrators, Sallie Mae (USAEducation, Inc.), and the NationalAssociation of State Scholarship andGrant Programs;
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Jane Stewart and Gail Somerville(alternate), representing lenders,secondary markets, and loan servicers;including the Consumer BankersAssociation, the Education FinanceCouncil, the Student Loan ServicingAlliance, the National Council of HigherEducation Loan Programs, ELMResources, and Sallie Mae;
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Dan Madzelan, representing theU.S. Department of Education.At its first meeting, Committee Ireached agreement on its protocols andagenda. During later meetings, theCommittee reviewed and discusseddrafts of proposed regulations. TheCommittee met over the course of several months, beginning in January2002.In addition to the proposedregulations discussed under the sectionof this document called SignificantProposed Regulations, Committee Idiscussed other issues related to theadministration of the Title IV loanprograms. One of these issues, whichrelated to late disbursements of Title IVaid, was referred with recommendationsto Committee II for disposition. Anotherissue that would have changed theregulation that provides that any singleinstallment payment in a graduated orincome sensitive repayment schedulecannot be more than three times greaterthan any other payment could not beaddressed since there would besignificant budgetary implications to thesuggested change. One of the principlesthat the Secretary placed around thisregulatory process was that no proposedchange could have cost implications.In order for the committee to havereached consensus, no member of thecommittee could dissent on theproposed regulations.Consensus was reached by themembers of Committee I on all of theproposed regulations in this document.
Significant Proposed Regulations
The following discussion of theproposed regulations begins withchanges that affect more than one of theTitle IV student loan programs.This is followed by separatediscussions of changes that affect onlyone of the three programs
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the PerkinsLoan Program, the FFEL Program, andthe Direct Loan Program. Generally, wedo not address proposed regulatoryprovisions that are technical orotherwise minor in effect.
Perkins Loan Program, FFEL Program,and Direct Loan Program Changes
Rehabilitation of Defaulted Loans(Sections 668.35, 674.39, 682.405, and 685.211)Current Regulations:
Section 668.35 of the current regulations allows a borrower who is in default on a Title IVloan to regain eligibility for additionalTitle IV assistance by either repayingthe loan in full or by makingarrangements to repay the loan that aresatisfactory to the holder of the loan andin accordance with the individual TitleIV loan program regulations. Inaddition, the borrower must, as part of those satisfactory arrangements, make atleast six consecutive monthly payments.The regulations do not explicitlyaddress defaulted loans on which ajudgment has been obtained by aPerkins school lender, a guarantyagency, or by the Department.Sections 674.39 and 682.405 of thecurrent regulations require schools andguaranty agencies to make a loanrehabilitation program available to alldefaulted Perkins, and FFEL borrowers,respectively, as required by the HEA.Section 685.211 implements therehabilitation program for the DirectLoan Program. Sections 674.39 and682.405 of the regulations also require a borrower who wishes to rehabilitate aloan on which a judgment has beenobtained to sign a new promissory note.We also apply this requirement whenrehabilitating a defaulted Direct Loan.
Suggested Change:
Many schools thatparticipate in the Perkins Loan Programsuggested that rehabilitation should not be available to a borrower who had aPerkins Loan on which a judgment has been obtained. As a result of thissuggestion, we included this issue onthe negotiated rulemaking agenda andexpanded the discussion to include theFFEL and Direct Loan programs.Those schools that suggested thechange for the Perkins Loan programand the negotiators representing theirinterests argued that requiring schoolsto offer rehabilitation to borrowersagainst whom they have secured ajudgment is not in the best interests of the Perkins Loan Program. They notedthat Perkins schools are required by theregulations to litigate in certaincircumstances to collect a defaultedloan. They stated that the considerableamount of effort and financial resourcesspent on litigation to obtain a judgmentis wasted when the school is laterrequired to vacate that judgment uponreceipt of the borrower
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s 12 consecutivemonthly payments, as part of arehabilitation plan. They also noted that by the time a school is required to
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